Improvement Process: EIP-4844 Impact on DeFi

MetalSwap Improvement Process [BLOG]-1

The much-anticipated EIP-4844, featuring the Proto-Danksharding update, is set to arrive in March, bringing significant scalability benefits for MetalSwap and, more broadly, the entire world of on-chain derivatives.

In today's article, we aim to understand the practical benefits of this update and how it will influence user behavior.

Proto-Danksharding Recap

In a recent article, we delved into the Proto-Danksharding update, examining in detail what will happen from a technical standpoint to understand how Ethereum's blockchain and its layer 2 solutions will be able to enhance their scalability.

To briefly refresh our memory, Proto-Danksharding introduces a new type of transaction that the Ethereum blockchain will be able to process. This new transaction is special because it contains what are called “data blobs”, or summaries of many transactions, in such a way that they occupy less space within the Ethereum blockchain's block.

However, the goal of this article is to understand how this update will practically change DeFi and user behavior.

Increased Scalability, More Transactions

The first conclusion we can draw is that once Proto-Danksharding is released, the transactional cost within the various layer 2 solutions will decrease by about 90%, which will lead users to complete more transactions.

With lower costs, users will be more inclined to complete on-chain transactions, which could result in more open positions on the MetalSwap dApp and all other derivatives present in DeFi.

But an additional advantage could come even before, as the arrival of Proto-Danksharding might attract completely new users to the blockchain world, as the benefits of using this technology will become even greater.

Some Predictions on Transactional Costs on MetalSwap

At the time of writing this article, opening a position within the hedging contracts of MetalSwap on the Optimism blockchain requires a gas fee of about $0.16.

This is a cost that many users are unwilling to face as they are accustomed to a web 2 system where there are no transactional costs of any kind.

Proto-Danksharding will reduce these costs by up to a factor of x10, which means finding oneself in a web 2-like environment where transactional costs can be almost negligible.

Taking the practical example mentioned above and reducing the current network fees by 90%, we can estimate that opening a position on the ETH hedging contracts would require a network fee of around 1 to 2 cents.

The Entire DeFi Ecosystem Will Benefit

Of course, it is not only MetalSwap that will benefit from this substantial reduction in transactional costs within the various ETH layer 2 solutions, but all the dApps in the DeFi space, particularly the derivatives category.

This will lead the industry into a new summer, where the mix of new users and low transaction costs will result in a very positive environment and a further explosion in terms of usage for DeFi


-The DeFi Foundation


✎ What is MetalSwap?

MetalSwap is a decentralized platform that brings Hedging Contracts on financial markets with the aim of providing coverage to those who work with digital asset and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators.

With MetalSwap we enable Hedging Contracts on the DeFi field, AMM style.